Determinants of Economic Growth and Poverty Minimization in Liberia: An ARDL Approach

Abstract

This paper analyses factors that influenced GDP growth rate in Liberia from 1980 to 2015. To carry out this analysis, we used time series data gathered from the World Development Indicators and the African Development Indicators. Applying the advanced autoregressive distributed lags estimation technique to our model, we found that international trade openness, foreign direct investment inflows, changes in the official exchange rate, and political/economic instability have been the main factors influencing GDP growth rate in Liberia over the period studied. The findings further reveal that a rise in international trade openness and official exchange rate have negative effects on GDP growth rate in the short run, but the effects are positive in the long run respectively. FDI inflows and political/economic instability were separately found to have a negative effect on GDP growth rate in the long run. Policy measures as to how to facilitate GDP growth and how to make that growth serve as a tool for poverty minimization are briefly discussed.

Keywords: GDP Growth rate; trade openness, poverty minimization, Liberia, Open Door Policy.

JEL Classification: O47, F43, C32